On February 1, 2013, Hall learned that he was bequeathed
500 shares of common stock under his fatherís will. Hallís father
had paid $2,500 for the stock in 2008. Fair market value of the
stock on February 1, 2013, the date of his fatherís death, was
$4,000 and had increased to $5,500 six months later. The executor
of the estate elected the alternate valuation date for estate tax
purposes. Hall sold the stock for $4,500 on June 1, 2013, the date
that the executor distributed the stock to him. How much income
should Hall include in his 2013 individual income tax return
for the inheritance of the 500 shares of stock that he received
from his fatherís estate?

$5,500$4,000$2,500$0

Correct - Your answer is correct.

Wrong - Your answer is wrong.

Detailed Answer

(d) The requirement is to determine how much income
Hall should include in his 2013 tax return for the inheritance of
stock which he received from his fatherís estate. Since the definition
of gross income excludes property received as a gift, bequest,
devise, or inheritance, Hall recognizes no income upon receipt of
the stock. Since the executor of his fatherís estate elected the
alternate valuation date (August 1), and the stock was distributed
to Hall before that date (June 1), Hallís basis for the stock would
be its $4,500 FMV on June 1. Since Hall also sold the stock on
June 1 for $4,500, Hall would have no gain or loss resulting from
the sale.